Wednesday, July 28, 2010

I’ve written about our new economy in which Americans no longer have jobs and are not needed as consumers. Both the jobs and purchasing power are moving overseas, and don’t think American corporations aren’t thrilled with that, ‘cause they are, and their profits are exploding as they implement this new regime.

Harold Meyerson has done an excellent job laying out the new ground rules for the new American economy in his op-ed in today’s Washington Post, The job machine grinds to a halt (7/28/2010). I can only snip a little from it, please read the entire article. I’ll come back to a couple of points he makes that I think Hawaii could keep in mind after the snip.

The problem isn't merely the greatest downturn since the Great Depression. It's also that big business has found a way to make big money without restoring the jobs it cut the past two years, or increasing its investments or even its sales, at least domestically.

In the mildly halcyon days before the 2008 crash, the one economic outlier was wages. Profit, revenue and GDP all increased; only ordinary Americans' incomes lagged behind. Today, wages are still down, employment remains low and sales revenue isn't up much, either. But profits are the outlier. They're positively soaring. …How can America's corporations so defy gravity? Ever adaptive, they have evolved a business model that enables them to make money even while the strapped American consumer has cut back on purchasing. For one thing, they are increasingly selling and producing overseas.

Meyerson says much of what I’ve been saying (why not crow a bit), but of course with greater insight, experience, and authority. And in a respected newspaper, not just in a humble little blog. I hope that everyone will read his article in full.

He talks about sustained, structural unemployment, but also provides direction for policymakers. This is extremely important in view of our local candidates and politicians spouting about the need for new business tax breaks. It’s all about how the tax breaks are done:

Across-the-board business tax cuts make no sense when business is already sitting on oceans of cash. Targeted tax cuts and credits for strategic investment and hiring within the United States, on the other hand, make excellent sense.

Meyerson also discusses the importance of public sector job creation. Corporations aren’t going to do it. Maybe we need more government jobs and infrastructure work rather than smaller government.

If our politicians have few suggestions to offer other than further cuts to the size of government, keep in mind that their mindless repetition of that mantra may simply mean hurting, rather than helping, our island economy.